Address your tax location

HD writes: An investor is asking my company to arrange for Enterprise Investment Scheme (EIS) approval. As part of the application we have to confirm the business has a permanent establishment in the UK. Beyond using a lawyer’s address as the company’s registered office, we have no presence in Britain, as most of our work is done in transit or at the premises of clients, who can be anywhere in the world, and our records are held by cloud computing. Do we have a permanent establishment?

A permanent establishment in the UK is a tax definition that can be met in a variety of ways, writes Jon Sutcliffe, partner at Kingston Smith LLP. This is usually realised by having a fixed place of business in the UK, such as an office, factory or construction project. However, having agents in the UK to make contracts on your behalf also creates a permanent establishment.

The carrying on of a business usually calls for some activity to be maintained. The mere holding of an interest-bearing account is unlikely to constitute a business. On the other hand, a holding company that simply holds shares in group companies, but whose management and administration is done in the UK, is likely to do so. The same applies to your company, even though you trade worldwide. Indications of location will be where the directors are to be found and where you meet to discuss the company’s business. Other factors that may demonstrate the place of management include the address that is used for purchase orders and invoices, and the address for the company bank account.

Given that your company is a UK one, it will be taxable in Britain on its income, so there is nothing to lose by arranging the company’s affairs so that it clearly has a permanent establishment here. In this way, you will be sure of getting the EIS benefit your investor seeks.